(Yicai Global) Aug. 10 -- Consumer prices rose in China last month on the back of soaring food costs as extensive floods affected many parts of the country.

The Consumer Price Index, the main gauge of inflation, rose 2.7 percent in July from a year earlier, according to data the National Bureau of Statistics published today. That was faster than the2.59 percent average expectation of 26 economists surveyed by Yicai Global. The CPI gained2.5 percent in June and 2.4 percent in May.

July’s CPI was up 0.6 percent from the month before, compared with a 0.1 percentage point drop in June from May, the NBS said.

This was largely the result of extensive flooding, which affected 38.2 million people and is estimated to have caused direct economic losses of CNY109.74 billion (USD15.8 billion), according to the Ministry of Emergency Management.

Food prices shot up 13.2 percent, an increase of 2.1 percentage points from the same period last year and 2.6 points from June, contributing 2.68 points to the CPI hike, the NBS said.

Widespread flooding affected the delivery of live hogs, said Dong Lijuan, a senior statistician at the NBS. This constrained the supply of pork, despite growing demand, and the price of the meat soared 10.3 percent last month, up from 3.6 percent in June.

Pork Prices

Wholesale pork prices have tracked a V-shaped path so far this year, declining from February through May and beginning to rally in June, a department of the agriculture ministry said recently.Though seasonal factors and the coronavirus will drive upprices over the coming months, tight supply will start to ease in the last quarter as pig herds, which have been devastated by African Swine Fever, and imports increase.

Bad weather also affected the supply of fresh vegetables in July, with price gains rising 3.5 points from June to 6.3 percent.

The cost of non-food items, which refers to essential household items that cannot be eaten, were the same as in June, compared with June’s 0.1 percent drop from May.

July’s price hikes will not change the general downward trend of prices in the second half, industry insiders said. The quarterly CPI growth rate is expected to fall in the third and fourth quarters and its annual growth rate while high in the first half, should be low in the second, they said.

Core CPI, which does not include food and energy prices, rose 0.5 percent year on year, 0.4 percentage point slower than in June.

The Producer Price Index, a gauge of industrial profitability, dropped 2.4 percent last month, narrowing the rate of decline by 0.6 point from June.

While the PPI may continue to post negative growth this year, this is expected to bottom out and stabilize after the third quarter as domestic policy support comes into effect and the pandemic gradually comes under control, said Liu Xuezhi, senior researcher at the Bank of Communications' financial research center.

Domestic Demand

As special debt issuance accelerates, infrastructure investment and various types of production have picked up, he added. The growth in domestic demand will also help to alleviate the impact of weakened external demand.

The PPI’s price of the means of production fell by 3.5 percent, an improvement of 0.7 point from June. The price of the means of subsistence rose by 0.7 percent, 0.1 point higher than last month.

The Purchasing Managers' Index rebounded to 58.1 percent last month, up nearly 1.3 points from June, Guotai Junan Securities said. The index has remained strong for several consecutive months, although the momentum of recovery has slowed.

The price of some industrial products were driven up by the flooding, which has helped the recovery of corporate profits in the industrial chain, especially in infrastructure and real estate, it added.

Editor: Kim Taylor